FBR Capital added NTELOS Holdings (NASDAQ: NTLS) to the FBR Top Picks list as a short. The firm maintained an Underperform rating and downside price target of $5.00.

Analyst David Dixon said checks confirm overbuild plans are in place. "NTELOS is a special-case roaming partner, and we believe an overbuild, absent a material expense reduction negotiated, is a certainty. Phones have been seeded with relevant technology since mid 2011 for CDMA voice, and seeding with LTE in 2H13 is on track. In Europe, when 900 MHz UMTS radios were lit, traffic switched immediately."

The firm estimates that 2015 SNA revenue declines from $208.8M to $82.9M under the overbuild scenario. . The impact in 2016 is expected to be even more significant as SNA revenue declines from $218.2M to $26.6M.

"Our checks indicate that Sprint is building its business case to justify the overbuild and is considering outsourcing the overbuild of the wholesale region to Shentel, a Sprint affiliate partner that covers an adjacent territory. However, Sprint is no longer capital constrained and may not want to give up owner economics."

The firm said NTELOS could breach its leverage ratio covenant (5 to 1) by the end of 3Q15.

The firm said recent takeover activity of smaller wireless carriers and Sprint management commentary has fueled bulls, however, they believe this is unwarranted as NTELOS is a special case.

For an analyst ratings summary and ratings history on NTELOS Holdings click here. For more ratings news on NTELOS Holdings click here.